In this article you are going to find out whether hedge funds think FirstEnergy Corp. (NYSE:FE) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is FirstEnergy Corp. (NYSE:FE) a splendid stock to buy now? Hedge funds are becoming hopeful. The number of long hedge fund positions increased by 4 recently. Our calculations also showed that FE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). FE was in 44 hedge funds’ portfolios at the end of the first quarter of 2020. There were 40 hedge funds in our database with FE positions at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most investors, hedge funds are assumed to be unimportant, outdated investment vehicles of years past. While there are more than 8000 funds trading at present, Our experts hone in on the elite of this club, approximately 850 funds. It is estimated that this group of investors have their hands on the lion’s share of the smart money’s total asset base, and by monitoring their matchless stock picks, Insider Monkey has deciphered many investment strategies that have historically defeated the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Zilvinas Mecelis of Covalis Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to go over the new hedge fund action encompassing FirstEnergy Corp. (NYSE:FE).
How are hedge funds trading FirstEnergy Corp. (NYSE:FE)?
Heading into the second quarter of 2020, a total of 44 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards FE over the last 18 quarters. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in FirstEnergy Corp. (NYSE:FE), which was worth $482.2 million at the end of the third quarter. On the second spot was Zimmer Partners which amassed $175.4 million worth of shares. D E Shaw, Two Sigma Advisors, and Adage Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Serengeti Asset Management allocated the biggest weight to FirstEnergy Corp. (NYSE:FE), around 13.16% of its 13F portfolio. Covalis Capital is also relatively very bullish on the stock, earmarking 9.45 percent of its 13F equity portfolio to FE.
Consequently, key hedge funds have jumped into FirstEnergy Corp. (NYSE:FE) headfirst. Kingstown Capital Management, managed by Michael Blitzer, established the largest position in FirstEnergy Corp. (NYSE:FE). Kingstown Capital Management had $40.1 million invested in the company at the end of the quarter. Josh Donfeld and David Rogers’s Castle Hook Partners also initiated a $31.4 million position during the quarter. The other funds with new positions in the stock are Zilvinas Mecelis’s Covalis Capital, Clint Carlson’s Carlson Capital, and Andrew Kurita’s Kettle Hill Capital Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as FirstEnergy Corp. (NYSE:FE) but similarly valued. We will take a look at The Clorox Company (NYSE:CLX), American Water Works Company, Inc. (NYSE:AWK), CoStar Group Inc (NASDAQ:CSGP), and V.F. Corporation (NYSE:VFC). This group of stocks’ market values match FE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CLX | 41 | 2343925 | 14 |
| AWK | 30 | 633418 | 1 |
| CSGP | 40 | 1689677 | -4 |
| VFC | 19 | 171262 | -10 |
| Average | 32.5 | 1209571 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.5 hedge funds with bullish positions and the average amount invested in these stocks was $1210 million. That figure was $1210 million in FE’s case. The Clorox Company (NYSE:CLX) is the most popular stock in this table. On the other hand V.F. Corporation (NYSE:VFC) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks FirstEnergy Corp. (NYSE:FE) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd and still beat the market by 15.6 percentage points. Unfortunately FE wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on FE were disappointed as the stock returned 2.4% during the second quarter (through May 22nd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
